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Trading volume on DEXs sky-rocketed during the market sell-off last week, Uniswap benefited the most

Looks like this month is going to be a positive one for decentralized exchanges (DEXs) such as Uniswap, especially as Ethereum and related DeFi assets are recovering some of their losses. The market started to crash last week when Ethereum fell from its all-time high of $4,357 to $1,853 in just 11 days. However, crypto analytics firm Glassnode still sees bright spots throughout the DeFi ecosystem in terms of stability and liquidity.

Trading volume on DEXs sky-rocketed during the market sell-off last week, Uniswap benefited the most

The report from Glassnode says:

“With heightened volatility, DEX volume rocketed to all-time highs.”

On May 19, a record trading volume of up to $11.7 billion took place on decentralized exchanges. This is particularly notable news because the price of ETH at the time was falling. Furthermore, during that period, the total number of unique 30-day traders surpassed 1 million for the first time. Uniswap is the one that gets the most of that usage, stating $5.7 billion in volume and handling 80% of all traders.

Decentralized exchanges, such as Uniswap and SushiSwap, are Blockchain-based protocols that allow anyone to buy, sell, and swap assets without having to hand over control of their funds to a third party. To do this, decentralized exchanges need to use smart contracts on the blockchain, as well as other DeFi protocols – allowing lending and trading without the need for financial intermediaries. As such, while Coinbase and other centralized exchange servers cannot cope with the excess trading volume generated by panic sales (and buy the dip), Uniswap can.

However, while the Ethereum blockchain is reliable, it has struggled with high transaction costs – fees that fluctuate depending on network congestion. During the height of the crash, those fees rose to insanity, as more and more protocols ran on top of Ethereum.

Glassnode said:

“As the crash ensued, volumes went way up as larger holders moved risk. Total transactions fell as smaller traders were priced out of taking any actions on-chain.”

According to Glassnode, the majority of trading volume comes from the transfer of stablecoins, namely Tether and USDC, as well as arbitrage bots. However, despite the downward price movement, the network has mostly worked as intended. Liquidity remains high, and stablecoins have more or less held up against the dollar. That is always a concern as price fluctuations can lead to withdrawals and difficulty obtaining enough collateral.

Aside from temporary price moves up to $1.02 and $0.99, none of the top three stablecoins used on Ethereum have deviated significantly from their closing prices for an extended period of time. This number allows sellers to confidently exit as they see fit for the stablecoin.

Recalling the price drop of March 12 last year, this is not an exceptional case. Stablecoin DAI (which is pegged at $1) has started trading up to $1.12 – not a safe place during the storm. Network Blockchain and DeFi in general have survived another harsh test. However, they need to maintain high liquidity and user ratio to stay active.

Glassnode concludes:

“Loss of liquidity worsens the user experience, creating a reflexive effect of even lower users, lower revenue, and more exit of liquidity. For now, growth remains strong and usage of DeFi propels to new heights.”

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